Why Are Smartphone Prices Becoming More Expensive?

With each breakthrough in technology comes more products and applications for the final consumers. As the years pass by, more functionality is added- the most recent example of technology that has immersed itself into the consumer market are Virtual Reality headsets and more applications and functionality is being added every year since inception. But smartphones are a much older innovation and this is not the first time they’re so expensive; you just have to look back in time. In 1983, the first mobile phone that was ever released into the market had a price that would put even the latest iphone X to shame; the price was a jaw dropping $9200 and in 1994 the first ever smart phone would set you back $1800 dollars. But yeah, history is repeating itself. In this article, we’re going to look at a few possible reasons why that is happening again.

Prices did fall afterwards due to the ease of access to mobile phones. But after the year 2000, more and more functionality was being added to cell phones and the prices gradually followed as well. And things really started to escalate when Apple released the touch screen version of smartphones or the original iphone back in 2007, smartphone prices skyrocketed and the age of touchscreen smartphones began. Hence, competition came naturally; adding more and more value to smartphones became a prominent objective which also led to steadily rising smartphone prices that showed no signs of stopping.

The major smartphone brands also have another tactic which is branding itself, and perhaps, brands are raising prices to become an attractive investment in the stock market by making more profit. However, there are other obvious reasons for the prices to climb to such record breaking extent especially in case of the new iPhone X which starts at $1000 and the Galaxy Note 8 which starts at $930. And when you include sales tax, foreign exchange rates and trade tariffs the prices become ridiculous; for example, if you were to buy the cheapest version of the iPhone X in Hungary; it would cost you a staggering $1500 where it is almost 50% higher than the normal price due to taxation.

So, What Else Is Causing Smartphone Prices To Rise?

Basically, there are three very obvious reasons.

Reason No: 1- They Cost A Lot More To Manufacture.

The Smartphone industry is extremely competitive. In order to survive, even the brands with the highest slice of the market has to contentiously improve, add upon and innovate their technology to meet the ever increasing consumer expectations every year. Smartphone manufacturers have the challenge of continually making their devices more efficient, overcome space constraints, add more functionality and create the most user friendly experience for customers.

Notice the gradual increase? The average cost of manufacturing these smartphones were rising steadily until 2017 when the Galaxy S8 was released. The S8 cost an estimated $307 to manufacture which crossed the making cost of S7 by $43 and by $36 of S7 Edge.

However, the iPhone X dwarfs Samsung S8’s making cost by more than a hundred dollars. The iPhone X costs an estimated $412 to manufacture; some even cost near $600 according to estimates. The point is, you need to consider the expenses rendered on research and development for testing additional features, the cost of advertising, manufacturing, administration and the extra effort they give to surpass competition for a product that has a life-cycle of at most a couple of years. These factors can help you understand why the numbers are shifting upwards so rapidly.

Reason No: 2-Usefulness

Smartphones have occupied a larger space in both our professional and casual life. They are basically the entire utility of a powerful computer which you can hold in your hands and store in your pockets. The ever increasing functionality of smartphones help us get more done. The Qualcomm snapdragon has a 10 nanometer SoC which is the first that is announced commercially, it has over 3 billion transistors and is up to 30% smaller than previous processors allowing for more space on the motherboard and has greater thermal efficiency. The Qualcomm Snapdragon is used by smartphones like Samsung, HTC, LG, Sony and Nokia and it’s also powerful enough to be used in full Windows 10 PCs like ASUS, Lenovo and HP who have signed up for it; this is a market generally dominated by Intel and AMD.

In technology, more power brings more functionality. As the the gap between the computing strength of PCs and Smartphones are shorter than ever before; it opens a doorway to new capabilities like augmented reality and virtual reality applications, dual cameras with newer photo manipulation/editing options.

The feature called the “neural engine,” is part of the new A11 processor that Apple developed to power the iPhone X. The engine has circuits tuned to accelerate certain kinds of artificial-intelligence software, called artificial neural networks, that are good at processing images and speech. These improvements and innovation are all there to give a higher value hence increasing the price.

Reason No:3- Economics

Reason 2 complements reason 3 wonderfully. Since, the need for smartphones are far greater than ever before in its period of existence; it contributes to its great demand on the market and naturally provides all the elements necessary for the higher prices.

As you can see here, Apple all by itself sold 1.2 billion units of iPhones in 10 years. But that’s not what we’re looking for, if you’ve noticed the sudden spike from 2010-2016, you’ll interpret the rise in the units of iPhones sold was unprecedented between these six years. And when you consider Apple’s most vibrant competitors like Samsung and Google and all the other top brands combined; it is easier to see just how many smartphones are being sold everyday. And with that kind of sales volume, prices tend to rise naturally.

Smartphones will probably continue to be better and more expensive until we find something else that can replace it. But smartphones definitely occupy a position in being one of most successful and popular consumer products ever made.